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Homework No. 2.

1. Does efficient market creates equilibrium.


Equilibrium in a competitive market occurs when
2. Draw the diagram where efficient market creates equilibrium and point out the
position of Consumer surplus and Producer surplus
3. Describe four government policies which affect market efficiency
Price and Quantity Regulations is the regulations that put a cap on the rent a
landlord is permitted to charge and laws that require employers to pay a minimum
wage
4. What happen when government impose a price ceiling higher than the price
equilibrium
It will lead to a overproduction since the supplier will get more profit.
5. What happen when government impose a price ceiling lower than the price
equilibrium
It will lead to a lower quantity that supplier are willing to sell.
6. Describe the impact of the case of number 5
The Impact of the case number 5 will lead to underproduction.
7. Draw the diagram that shows the inefficiency of a rent ceiling of the case of
number 5. Does total surplus increase or decrease
8. What happen when government impose a minimum wage lower than the price
equilibrium
9. What happen when government impose a minimum wage higher than the price
equilibrium
10. Describe the impact of the case of number 9
11. Draw the diagram that shows the inefficiency of a minimum wage of the case of
number 9. Does total surplus increase or decrease
12. What is tax incidence
13. Suppose, price equilibrium is USD 3.00 while quantity equilibrium is 350. Draw
the diagram when government impose tax on sellers in amount of USD 1.50
14. What happen to the new price equilibrium and the new quantity equilibrium. Who
pay most of the burden of the tax

15. Suppose, price equilibrium is USD 3.00 while quantity equilibrium is 350. Draw
the diagram when government impose tax on buyers in amount of USD 1.50
16. What happen to the new price equilibrium and the new quantity equilibrium
17. Who pay most of the burden of the tax
18. What is the main factor that decides who pay most of the burden of the tax
19. In the case where supply is elastic and demand is inelastic, who pay most of the
burden of the tax, and why. Explain using diagram
20. In the case where supply is inelastic and demand is elastic, who pay most of the
burden of the tax, and why. Explain using diagram.
21. In the case where supply is elastic and demand is perfectly inelastic, who pay the
tax and why. Explain using diagram.
22. Draw the diagram when government impose production quota where the quantity
of the quota is lower than the quantity decided by the market (or quantity
equilibrium)
23. What are the impact of question number 22.

24. Describe factors which constrained a households consumption


25. Draw the line than can explain the limit of the households consumption
26. What is relative price
27. What is the mathematical names of relative price
28. What happen when relative price change.
29. What happen when real income change
30. What is the benefit or satisfaction from the consumption of a good or service
31. What is marginal utility
32. What happen to the marginal utility when the quantity of a good increase.
33. What is the name of the above principle

34. What is the key assumption of marginal utility theory


35. What is consumer equilibrium
36. How to maximized consumers total utility
37. What is marginal utility per dollar
38. What happen when marginal utility per dollar of consumption of two goods are
not equal.
39. There are two goods, Movie and Soda. Suppose the price of a Movie (or Pm)
falls. According to the law of demand, the demand of Movie (or Qm) increases.
Explain this negative relationship using the marginal utility theory (or marginal
utility per dollar approach).
40. Suppose the price of Soda (or Ps) rises. According to the law of demand, the
demand of Soda (or Qs) decreases. Explain this negative relationship using the
marginal utility theory (or marginal utility per dollar approach).
41. What happen to demand when ceteris paribus income increases

42. There are two goods, Movie (M) and Soda (S). Describe the budget equation in
terms of the quantity of Soda or Qs.
43. Draw the budget line using the budget equation
44. What does budget represents in our life
45. What happen to the budget line when price of Movies goes up
46. What happen to the budget line when price of Soda goes down
47. What happen to the budget line when real income goes up
48. What is indifference curve.
49. What does indifference curve represents in our life
50. Draw the indifference curve of Movie and Soda
51. What is marginal rate of substitution
52. What is diminishing marginal rate of substitution
53. Draw the indifference curve for perfect substitutes and explain

54. Draw the combination of budget line and indifference curve where you get best
affordable point.
55. Using diagram, shows what happen when you want to maximize utility with a
given income
56. Using diagram, derive the demand curve from the combination of the budget line
and the indifference curve when price changes
57. Using diagram, derive the demand curve from the combination of the budget line
and the indifference curve when income changes
58. The change in price creates two effects. Name them.
59. Using diagram, shows both effect for a change in the price of a normal good
60. What happen when the good is inferior.